How Singapore became a world-class jurisdiction for digital assets

To most experts, Singapore's emergence as a leading player in the global crypto space isn't a surprise. The country has long been one of the world's top TradFi (traditional finance) centers, and Asia's top FinTech hub. In recent years, sizable wealth has flowed into Asia's premier financial hub.

The wide interest in crypto in Singapore is partially driven by a positive and prudent regulatory framework. Recognizing the scale of both the opportunity and risk associated with digital assets, Singapore's regulatory authority, the Monetary Authority of Singapore (MAS), struck a careful balance in its approach to moderating the industry while protecting users.

For example, we recently received in-principle approval from the MAS for a Major Payment Institution (MPI) License.

Many commentators agree that the nation's measured stance on crypto regulation is setting the foundation for a sustainable crypto space in Singapore. In this article, we explore the size of the industry's potential in the country, explore its regulatory landscape today, and discuss how Singapore's crypto mandates are encouraging growth.

Solid ground to build upon

Singapore was among the early hubs for crypto — arguably a consequence of its existing solid foundations for TradFi and FinTech growth. The nation attracts the largest share (59%) of all FinTech funding in the ASEAN region, and operates a Fintech regulatory sandbox to encourage experimentation with financial products and services in a live environment.

The nation has nurtured an active and ambitious ecosystem of FinTech companies eager to cut deals and collaborate on further evolution for finance broadly. Crypto players of all varieties, then, found in Singapore a willing and supportive home to grow from. The country's tax structure, meanwhile, has proven to be a further catalyst for crypto adoption. There's no capital gains tax in Singapore, meaning crypto traders can keep hold of a larger portion of their gains. That could explain why more than half of finance-savvy Singaporeans own crypto, according to a recent study.

Significantly, the authorities have made it clear that encouraging crypto trading isn't their priority. "If a crypto hub is about experimenting with programmable money… If it is about applying digital assets for use cases, like atomic supplements… If it is about tokenising real, international assets to increase efficiencies and reduce risk in financial transactions, yes, we want to be a crypto hub. But if it is about trading and speculating in cryptocurrencies for its own sake, that is not the kind of crypto hub we want to be," commented Ravi Menon, then managing director of the Monetary Authority of Singapore, when speaking at the 2022 Singapore Fintech Festival.

A strong regulatory framework

Unsurprisingly, Singapore took an early interest in crypto regulation. Long before terms like 'Bitcoin' entered the mainstream lexicon, the country's TradFi regulation was evolving and would eventually stretch over to influence the future digital asset space. The Securities and Futures Act 2001 "governs the regulation of activities and institutions in the securities and derivatives industry". Today, the act covers cryptocurrencies that meet the definition of a security or security token, according to Global Legal Insights.

Years later, the Payment Services Act 2019 (PS Act) was passed in 2019 and came into force in January 2020 to regulate payment systems and payment service providers in Singapore. That included digital payment tokens, such as earlier cryptocurrencies including Bitcoin and Ether, and the stablecoins that followed. December 2019 brought an amendment to the PS Act to introduce more robust anti-money laundering and terrorism financing requirements for digital payment token service providers. And in July 2020, the MAS published the Consultation Paper on a New Omnibus Act for the Financial Sector that aimed to align Singapore's Virtual Asset Service Provider regulation with Financial Action Task Force standards.

The MAS isn't alone in shaping a strong regulatory framework for Singapore's crypto space to grow within. The Singapore Exchange Regulation (SGX RegCo) supports the efforts of the MAS by requiring consultation with SGX-listed companies planning to conduct an initial coin offering, to help make sure compliance requirements are met. Meanwhile, the Singapore Police Force (SPF) also takes an active involvement in protecting the community from fraudulent activities using crypto. In February 2024, the SPF and the Cyber Security Agency of Singapore (CSA) released a joint advisory warning about instances of phishing attacks that aim to drain hardware wallets.

How regulation is spurring crypto growth

The sophistication and robustness of Singapore's crypto regulation has attracted to the nation numerous leading names in the industry. Rather than seeing strict regulation as a hurdle, most in the industry welcome the transparency it provides.

Meanwhile, from the perspective of users, clear regulations help to bring stability to the crypto space, which builds trust in its security and sustainability — a key driver of adoption. Many would agree that the high-profile collapse of crypto companies in recent years, including those of Singapore-based Terraform Labs and Three Arrows Capital, severely damaged trust in the sector. While growth for the industry often comes via innovation in products and the user experience, trust — grounded in sophisticated regulation — is the essential ingredient for sustained growth of the industry.

The final word

The evidence suggests that Singapore is succeeding in evolving its leadership position for TradFi authority to also now excel as a crypto hub. Clear and sophisticated regulation is pivotal to this change, and the nation's measured approach is helping to strike an important balance between protecting users while allowing companies the freedom to innovate and grow. That's why OKX applied for our Major Payment Institution (MPI) License in the country, and why Singapore is an essential part of our global strategy.

Crypto leapt back into the spotlight in early 2024 with a new all-time high for Bitcoin and a wider bull market emerging. But that's just a sliver of what the industry at large has to offer. Singapore, as a financial and tech hub, is well placed to be the root for fresh innovation.